a transfer the entire function would then become the duty of the second department; and that there might be transferred along with such function the personnel, records, and other property of the first department pertaining to the performance of such function. This view, if adopted, would even provide a basis for questioning the authority of the President, by Executive Order No. 9262, to grant to the Secretary of the Navy the authority possessed by the Secretary of War in connection with the construction of facilities at military posts. In other words, à distinction might well be made between the authority to transfer a function and the authority to bestow upon any, or every, other department of the Government the powers similar to those which the Congress had conferred upon a particular department. But, it will be noted, this phase of the matter is not questioned in the report of the Comptroller General.

What is questioned is the authority of the President to make available for the work authorized by section 1 (a) of the act of July 2, 1940, the funds of the Navy Department. And, on this point, it is the view of the General Accounting Office that the Congress has made itself unmistakably clear as to its intent by the specific provisions of section 3, title I, of the First War Powers Act. Said section provides, in effect, that in connection with the transfer of a function under the authority of the act, the moneys appropriated for the use of the first department shall be expended only for the purpose for which appropriated under the direction of such other agency as may be directed by the President to perform such function, except to the extent otherwise authorized by the Congress.

Applying the provisions of the said section 3 to the situation hére under consideration, there can be but one conclusion. Even if it be assumed that the Congress intended the President to have practically limitless authority to extend to other departments any powers which the Congress previously had bestowed upon a particular department, it would seem that it must be conceded that the Congress has specifically retained control over the extent to which appropriated funds might be used in carrying out any such assimilation of powers. Consequently, as was stated in the Comptroller General's report, it is considered that the provisions of said section 3 constitute an absolute bar to the use of naval appropriations for the performance of such work as is authorized only by section 1 (a) of the act of July 2, 1940, and Executive Order No. 9262.

The

The other point which was raised in the report of the Comptroller General serves to strengthen the questioned propriety of the execution of the contract. It was conceded by all concerned that this project would take approximately 2 years to complete. In other words, even at its inception it was known that it would not be available for use as an aqueduct until the latter half of the year 1947. The act of July 2, 1940, was passed, as previously indicated, to expedite the strengthening of the national defense prior to our entry into the war. First War Powers Act was passed to expedite the prosecution of the war effort. In view of the express purposes of these two statutes, which had been cited by the Secretary of the Navy as his authority to construct the aqueduct, the Comptroller General posed for the consideration of the Congress the question of whether the general provisions of said two statutes should properly be regarded as authority for any such long-range project as was here involved. And of significance in connection with this question is the fact that it could not have been known at the time the determination to continue this project was made whether, shortly thereafter and long before its completion, there would not have been issued a formal termination of the national emergency or even the consummation and ratification of a formal treaty of peace. In other words, to put the question simply, is there not involved here a project concededly undertaken pursuant to wartime authority which, from a practical standpoint, definitely was for peacetime use?

Thus far, this statement has been devoted solely to the legal phase of the matter as it appeared at the time the report of the Comptroller General was prepared. However, by a letter of February 1, 1947, addressed to the chairman of this committee, the Secretary of the Navy has made reference to the provisions of Public Law 289, approved April 4, 1944, as constituting the statutory authorization for the construction work. Hence, it is appropriate at this time that comment be made with respect to this statute as well as to certain statements and contentions which have been made since the date of the report.

First of all, it should be stated that it is a matter of considerable surprise that the said Public Law 289 was not cited in reply to the Comptroller General's request for the statutory authority for executing a contract with the city of San Diego. In recent discussions concerning this matter, it has been suggested that

the reason the said statute was not cited in the original reply of the Secretary was that the contract with the city of San Diego was a disposal rather than a construction contract and that the authorities cited in the Secretary's reply were solely those concerning the right of the Secretary to dispose of the aqueduct in the manner provided by said contract. Also, in the letter of the Secretary of the Navy, under date of February 1, 1947, it is stated that the Comptroller General has made a basic mistake in his approach to the problem arising out of the confusion "which seems to exist in the Comptroller General's mind with respect to the contracts in question."

At this point, let us examine the contract with the city of San Diego and see what it provides. Article 1, subsection (a), provides:

"The Government, at its own expense, shall diligently prosecute to completion a steel and concrete aqueduct

* *

Can it seriously be contended, in view of the above-quoted provision, that the Government did not thereby take upon itself a legal obligation, running to the city of San Diego, to construct the involved aqueduct? While the remaining provisions of the said contract concern primarily the terms upon which it is to be disposed of upon completion, it is a misstatement to say that the contract does not call for the making of "any expenditures whatsoever."

Moreover, it is clear from the letter of the Secretary of the Navy, in reply to the Comptroller General's letter of June 6, 1946, that the Navy Department was fully cognizant at that time that the said contract with the city of San Diego was both a construction and a disposal contract. Consider, in this connection, the language on page 2 of said reply, as follows:

"The Chief of the Bureau of Yards and Docks, acting by my authority as contracting officer on the subject contract, determined that the accomplishment of the provisions of this contract, including the furnishing by the Government of extensive facilities on the terms provided, is necessary in the interests of the national defense.

"Under the circumstances the subject contract is considered to be one for the expansion of facilities necessary in the interests of the national defense and authorized, as in the case of all facility contracts, by the statutes cited," Consequently, present reliance by the Navy Department upon the provisions of Public Law 289 might be regarded as a shift to what has been decided to be firmer ground than that relied upon in the reply to the Comptroller General's letter of June 6, 1946.

But, aside from that, let us examine the provisions and legislative history of the said Public Law 289, and the provisions and legislative history of Public Law 347, approved June 22, 1944, wherein, the Secretary of the Navy states, money to pay for the contracts in question was provided. Public Law 289 authorized the Secretary of the Navy to establish and develop certain naval shore activities by the construction of temporary or permanent public works; various sums were mentioned therein as "approximate costs" for such projects, the amounts being listed under the subheads of "Fleet facilities," "Aviation facilities," and the like, including "Miscellaneous structures"; and under the said act it was required that prior to the acquisition or disposal, by lease or otherwise, of any land acquired for naval use under the authority thereof, the Secretary of the Navy should "come into agreement" with the Naval Affairs Committee of the Senate and House of Representatives with respect to the terms of such acquisitions or disposals.

In the report to the House Committee on Naval Affairs (No. 1255), in connection with this legislation, there is contained a detailed list of the projects proposed to be undertaken in connection with the improvement and expansion of water-supply systems. In this list there are described some 53 projects, to be located in some 11 or 12 naval districts and to cost approximately $3,636,000. Only 2 of these 53 projects were estimated to cost over $300,000, and these 2 were estimated as $660,000 and $476,000, respectively. The amount estimated therein for the San Diego base was $200,000 for a purpose described as follows: "Additional water supply lines, 16-inch supply line across San Diego Bay and 16-inch line to interconnect to naval air station system."

Notwithstanding the fact that detailed estimates for specific projects are furnished by the Navy Department in support of appropriation requests, nowhere has there been found in the appropriation requests an estimate for the San Diego aqueduct.

Public Law 347, which, as hereinbefore indicated, the Secretary relies upon as providing the funds necessary for the aqueduct, was the Naval Appropriation Act for the fiscal year 1945. Of course, since it was enacted on June 22, 1944, some

4 or 5 months before the President's Special Committee To Investigate the San Diego Water Situation was appointed, the legislative history of this act likewise contains no mention of the project here in question. In fact, in the hearings on the bill there are listed what appear to be the same projects for which funds were authorized to be appropriated in the said Public Law 289, including the $200,000 project for the San Diego base, mentioned above. It is suggested, for the consideration of the committee, that the Navy Department be requested to cite the specific provisions or terms of the statutes involved which are regarded as conferring the authority claimed.

It is true that under date of January 6, 1945, the Navy Department wrote a letter to the chairman of the House Naval Affairs Committee bringing to attention this project. Also, it is true that clearance was obtained in May 1945 from the Naval Affairs Committees of the Senate and of the House of Representatives with respect to the acquisition of land for the project here in question. But those committees have no effective authority to approve projects not otherwise authorized by law and cannot by such approval give validity to what is not otherwise authorized by law.

Are we to say that it is within the authority of an administrative department to go before the Appropriations Committees of the Congress and describe in detail some 53 projects totaling less than $4,000,000 for which funds are desired, and then without further communication with the said committees undertake a project which was expected at the outset to cost about 4 times the sum total of all 53 projects which were described in its request for funds? I am sure that this committee knows that in the normal processes of our Government the Congress enacts the laws for the executive branch to administer and that it is not proper for the executive branch to proceed without authority and then advise the Congress of what it has done.

In this connection, I should like to refer once more to the position taken by the Administrator, Federal Works Agency, when called upon to allocate $3,500,000 from Lanham Act funds for this project. He first stated that it would be necessary to secure clearances from the Bureau of the Budget and the Appropriations Committees of the House and Senate before such funds could be advanced, and then later, In a letter of August 30, 1945, to the Secretary of the Navy, expressed his reluctance even to go that far in obtaining the necessary authority to allocate funds because of the cessation of the war and the onset of demobilization. And, finally, by a letter dated November 15, 1945, the Administrator absolutely refused to make the allocation requested by the Secretary of the Navy and referred therein to a limitation which the Congress had placed on recent appropriations for the continuation of Lanham Act activities, which limitaton, he stated, might have been placed thereon "as the result of an impression on the part of Members of the Congress that we were planning to make a sizable allocation for the San Diego job."

Moreover, there is some question concerning the procedure followed in the disposition of the aqueduct by the said contract with the city of San Diego. It is contended that the work was undertaken pursuant to the provisions of Public Law 289; but that statute also contains specific provisions applicable to the disposition of projects undertaken thereunder. It requires that prior to disposal the Secretary of the Navy come into agreement with the Naval Affairs Committees of the Senate and House with respect to the terms of such disposition. And yet the position of the Navy Department seems to be that it could construct the aqueduct under Public Law 289 and dispose of it under section 1 (b) of the act of July 2, 1940-a statute enacted 4 years earlier. In this connection, it would hardly seem open to question that by the term "come into agreement" the Congress did not contemplate the mere transmission to the committees of a copy of a contract or lease after it was executed. And that is all that appears to have been done here.

It is understood that as of VJ-day there was considered the advisability of canceling the construction work on the aqueduct, but that after a thorough review of the matter it was decided to complete the project. It is understood further that this decision was based, first, upon the fact that considerable work had been done on the project-the Secretary of the Navy states in his letter of February 1, 1947, that on October 17, 1945, construction of the aqueduct was "well under way" and, secondly, because it was concluded that the emergent situation with respect to the water supply in San Diego could be expected to continue even after the war was over and it was not expected that the number of naval personnel in San Diego would materially decrease for some time. A report on file in the General Accounting Office indicates that there were let eight basic construction contracts covering this aqueduct. Three of these eight contracts

were let prior to VJ-day, under dates of May 14, May 18, and July 28, 1945, respectively. The record further indicates that there were no voucher payments under any of these contracts before the latter part of November 1945, and, also, that the only work which had been started prior to August 14, 1945, was the construction of a Navy office building near the San Vincente tunnel.

Also, contained in the file is a series of newspaper clippings concerning the proposed cancellation of the project after the end of the war and its subsequent revival in October 1945. The conclusion which these clippings inevitably leave in the mind of the reader is that considerable pressure was brought to bear both upon the President and upon the Secretary of the Navy. As stated, this information emanates solely from newspaper clippings, and is, of course, of a hearsay nature and, therefore, was not mentioned in the formal report of the Comptroller General to the Congress. Nor is there known the nature of the pressure which was brought to bear or whether it had any direct effect upon the decision of the Secretary of the Navy to revive the project. These are matters which perhaps the committee may desire to investigate further.

In conclusion, it is the opinion of the Comptroller General that where the Federal Government is to finance the construction of a public-works facility for the sole use and benefit of a municipality or other subdivision of a State, notwithstanding the possibility that eventually the Federal Treasury may be reimbursed the cost of the work, specific authorization by the Congress should be secured. In this connection, it might be mentioned that a move is now under way to obtain a postponement of the first payment under the contract by the city of San Diego for a number of years. Furthermore, there would appear to be no justifiable reason why that was not done here especially in view of the fact that the project was one involving the expenditure of millions of dollars of Federal funds. And, finally, the situation here may be cited as a typical example of the extent to which the general provisions of a statute, conferring broad authority upon an administrative agency, can result in a complete circumvention of the Congress in the expenditure of public funds.

(Whereupon, at 12:20 p. m., a recess was taken until 2 p. m. this

day.)

AETFRNOON SESSION

The committee reassembled at 2 p. m., pursuant to recess, Senator Homer Ferguson presiding.

Senator FERGUSON. You may proceed, Mr. Hill.

STATEMENT OF JAMES T. HILL, JR., GENERAL COUNSEL, NAVY DEPARTMENT

Mr. HILL. Senator, how would you prefer that I proceed? I think perhaps it might be desirable if I submit myself to questioning, and in connection with that I may be able to make some references that may be helpful.

Senator FERGUSON. I suggest that if you have any statement, you make your statement first.

Mr. HILL. I have no prepared statement, Senator.

Senator FERGUSON. Is there any particular part of the GAO's findings or testimony that you would like to reply to, that you think

needs clarification?

Mr. HILL. Perhaps I could run over certain points that occurred to me this morning as Mr. Fisher and Mr. Casey testified.

I would perhaps like to say at the outset that following the Comptroller General's letter to the Secretary in June we have not been advised by the Comptroller General that any elaboration of the explanation offered was desired. It has never been requested. No further discussion has ever taken place since that time.

Senator FERGUSON. When did you first get word that the GAO thought the contract was illegal?

Mr. HILL. Actually not until January of this year, when we were given a copy of the letter that had been sent to the Congress. The question had been asked in June of 1946, to which we had replied. In the intervening 7 months there were no discussions, no requests from the General Accounting Office for further explanation or elaboration of the points that had been made.

Senator FERGUSON. Do we have a copy of the letter that we got in June?

Mr. MACOMBER (committee clerk). I think it is included with the exhibits, with the letter of February 10.

Mr. HILL. That is right.

Senator FERGUSON. Did you reply to that letter?

Mr. HILL. We replied to that letter, and that reply was referred to this morning by Mr. Fisher and Mr. Casey. We conceive that question from the Comptroller General to go to our authority to dispose—that is, the basic authority of the Navy Department to make the disposal contract. We regarded the contract with the city of San Diego as a contract for disposition.

Senator FERGUSON. Why did you not treat this as surplus property? Mr. HILL. Actually, sir, it was not surplus property. It still was necessary to fill a vital need of the Navy Department in that area. Senator FERGUSON. Then why didn't you keep it?

Mr. HILL. It had a vital need as part of a unit of a complete water system. Standing alone it had no particular value or utility.

Senator FERGUSON. Do I understand then that it is going to be the policy, and is the policy of the Navy, that if they have property that they are interested in, they will dispose of it in this manner and not put it through surplus property? In surplus property you now and then sell a piece of property and reserve certain rights in it.

Mr. HILL. That is right, sir.

Senator FERGUSON. And why can it not be done through surplus property?

Mr. HILL. No. 1, this was not, as I undertook to point out, surplus property.

No. 2. There was no interest which War Assets could have disposed of at that time.

Senator FERGUSON. Would you give to the committee a list of the properties that you have disposed of in this way-I don't expect it today-not declared them surplus property, but disposed of them under lease or option or something?

Mr. HILL. I can supply a list of properties which we disposed of pursuant to options or under our general war powers. I will be glad to furnish that.

Senator FERGUSON. We would like to have that with other matters, rather than statistics.

(The information requested was furnished as follows:)

Hon. GEORGE D. AIKEN,

DEPARTMENT OF THE NAVY,
OFFICE OF THE GENERAL COUNSEL,
Washington 25, D. C., April 9, 1947.

Chairman, Committee on Expenditures in Executive Departments,

United States Senate, Washington, D. C.

DEAB MR. CHAIRMAN: In response to the request made upon Mr. James T. Hill, General Counsel for the Department of the Navy, during the course of his testimony before your committee on February 27, 1947, for information regarding